I think the judgment dismissing the complaint was. tight and should be affirmed. There is no dispute that the city had $25,000 in cash which belonged to Baird when the Kelly claim for damages was tiled, and that it proposed to keep the money to meet that claim. Hor is there any dispute that negotiations were! had by Baird with the city for payment to him of the $25,000, which negotiations resulted in the city Consenting'to pay the sum over to him upon liis-giving a new bond in the sum of $10,000 to meet whatever damages Kelly, might establish. ■ I concede that the defendant sureties -could not -complain if the city had not' retained in its hands any moneys due Baird on his contract, and that the city was under no legal obligation to do so for the purpose of reducing ■or guarding against the sureties’ liability. But the city had retained the money and had it ir its hands, and the' Kelly claim had been presented and the liability óf his recovering a judgment was under discussion, and the city was advised by its counsel to retain the money for the purpose of meeting any judgment which Kelly might obtain. Such condition of affairs is not only shown" by the evidence- and stipulations made on the trial of this action, but is fully illustrated in City of New York v. Baird (74 App. Div. 241; 176 N. Y. 273), the records of which case appear to have been embraced -in the stipulations. With all this situation confronting it, the city voluntarily entered into a new contract with the principal, Baird, whereby it agreed to pay him the $25,000 and take from him a new and independent bond conditioned for the payment of any judgment which Kelly might obtain- to the extent of $10,000. This was a new and independent contract between the obligee of the original bond given by these respondents and their principal, Baird, and.it seems to me that the new bond" and agreement took the place of" the- original bond so far as the Kelly claim Was concerned, and released the sureties from any obligation to pay any sum because of that claim. That the city 'did- hot exact a bond sufficien t to pay the claim as ultimately established was its own fault. It was not a case of taking additional security from the principal, but was the taking of a substituted security. While, the city was not obliged to retain any moneys, it did actually have in hand a sum moré than sufficient to satisfy the' Kelly claim. Having the money in hand *777and virtually setting it apart to meet the Kelly claim, the city voluntarily released it and paid it over to the principal.
As early as the decision of Law v. East India Company (4 Ves. Jr. 829) the master of the rolls said: “ It cannot be contended upon any principle that prevails with regard to principal and surety that where the principal has left a sufficient fund in the hands of the obligee and he thinks fit instead of retaining it in his hands to pay it back to the principal, the surety can ever be called upon.”
The situation presented is not unlike that of a creditor secured by bond levying upon the property of his principal and voluntarily releasing the levy, which was held in Commonwealth v. Miller’s Admrs. (8 Serg. & Rawle, 452). to discharge the surety.
I cannot see how the question as to whether the city was obliged to retain any moneys is decisive of the question at bar. The moneys had been retained and were being retained to meet the Kelly claim, and were voluntarily released and paid over to the principal and a new obligation was taken. It seems to me that such a transaction released these respondents from any further liability under their bond respecting the Kelly claim, and that the judgment of nonsuit was right and should be affirmed.
Judgment reversed and new trial ordered, with costs to appellant to abide event.